Associations

An incorporated association is the legal form used by most of Papua New Guinea’s churches, sports clubs, women’s groups, landowner associations, professional bodies, charities and NGOs. The Associations Incorporation Act 2023, certified on 29 May 2023, repeals and replaces the 1966 Act that had governed them since before Independence. It keeps the familiar core — a public notice, a set of rules, a committee and a public officer, a certificate of incorporation that makes the association a separate legal person — and adds a great deal that is new, most of it modelled on the Companies Act 1997.

Two categories, chosen at the start

Every applicant must choose one of two categories, and the choice carries consequences for the life of the association. A public benefit association is formed for a charitable purpose that benefits the public. A member benefit association is formed and operated primarily for its own members — a social club, a sporting body, a professional group.

Public benefit associations are watched more closely: the Registrar may bring court proceedings about them, and on a winding up their surplus assets can pass only to another public benefit body, not back to the members. Member benefit associations are treated more lightly — they may opt out of holding annual meetings and of preparing annual reports and financial statements.

Incorporating: a two-stage process with a wait in the middle

Incorporation runs in order, and the middle of it is a statutory waiting period that cannot be shortened.

• Adopt rules by special resolution. The rules must address the matters listed in the Schedule to the Act (section 20(2)). A special resolution needs 75 per cent of the votes cast at a meeting called on at least 21 days’ notice stating that a special resolution is proposed (section 64(3)). The same meeting should settle the name and two alternatives, the category, the initial committee, the public officer and the registered office.
• Authorise an applicant and collect consents. The committee authorises a person to apply (section 6(1)). Each proposed committee member signs a written consent in the prescribed form (section 23). That consent is kept with the association’s records rather than filed, but must be produced if the Registrar asks.
• Lodge the notice of intention. The applicant lodges a notice of intention to apply for incorporation setting out the proposed names, every initial and shadow committee member, the public officer, membership qualifications, addresses, the principal activity, the objectives and the category, with the proposed rules attached (section 6(2)). The Registrar checks it and, if satisfied, approves it for publication and assigns an identification number; a refusal may be appealed to the Minister (section 6(5)).
• Publish the public notice. Once approved, the applicant gives public notice in a daily newspaper circulating throughout the country, or in the National Gazette (section 3), stating the proposed name and identification number, membership qualifications, principal place of business, principal activity and objectives (section 6(3)).
• Wait 60 days for objections, then apply. The application for incorporation must be made within six months of the notice, with a statutory declaration and a copy of the rules.

The Registrar then enters the association on the register and issues a certificate of incorporation, which is conclusive evidence that everything required was done properly. The two prescribed forms — the notice of intention and the committee member’s consent — can be downloaded in Word or PDF from the association forms page.

What the rules must contain

The Schedule lists fifteen matters: the name; the objects; membership qualifications; subscriptions; the committee, its election, terms, vacancies, quorum, procedure and pay; quorum and procedure at general meetings; notices of meetings; sources of funds; management of funds and the signing of cheques; intervals between general meetings; audit; how the rules are altered; the seal; how the objects are altered; and custody of the books.

The rules bind the association and every member as a contract, and they are void so far as they contradict the Act. Changing the rules or the objects requires a special resolution.

The committee, the public officer and the members

Committee members owe statutory duties drawn from company law: a duty of care, diligence and skill judged by what a reasonable committee member would do in the same circumstances; a duty not to act contrary to the Act or the rules; a duty to act in good faith and in the association’s best interests, breach of which in bad faith is a criminal offence; a duty to disclose material interests; and a duty not to misuse the association’s private information. A committee member may rely on advice from staff, professionals and fellow members if acting in good faith and after proper inquiry.

The Act also reaches people who are not formally appointed. A shadow committee member — someone on whose directions the committee acts — carries the same duties. The public officer is the association’s point of contact for the Registrar and for service of documents.

Members themselves are protected. Section 61 provides that a member is not liable to contribute towards the association’s debts, liabilities or obligations, or the costs of winding it up, by reason only of being a member. The rules may impose a liability, in which case creditors must be told of any change by public notice; and a member who acts as a shadow committee member, signs a document without the association’s correct name, or personally guarantees a debt is liable on that separate footing.

What must be filed, and when

Every incorporated association must lodge an annual return in the prescribed form, during the month the Registrar has allocated to it, with the fee and, where financial statements are required, a copy of them. No return is due in the year of incorporation or re-registration. Failure is an offence by every committee member, and an association six months late is removed from the register without notice.

Audited financial statements are required for any accounting period in which the association receives a government grant of any amount, or its gross revenue exceeds the annual gross revenue amount, or its donations from the public exceed the annual donations amount. The draft Regulation sets those last two figures at K2,000,000 and K500,000. The statements — a statement of financial position, an income and expenditure statement and a cash flow statement giving a true and fair view — must be prepared within four months of balance date, signed by the committee, audited by a qualified auditor appointed at the annual meeting, and filed with the annual return.

Offences

The Act creates more than thirty offences. They range from filing defaults punishable by fines of K500 to K5,000, usually with short terms of imprisonment as an alternative, through governance offences such as undisclosed conflicts of interest and bad-faith conduct (K50,000 or two years), to the general fraud offences: false statements, misapplying property, falsifying records (K100,000 or two years) and carrying on the association’s business to defraud creditors or donors. Most filing offences are committed by “every member of the committee”, and the Registrar prosecutes.

Overseas associations and NGOs

An overseas association or NGO must apply to the Registrar under Part XIII before it conducts operations or transacts business in the country, with the fee and evidence of its overseas incorporation, translated if necessary. Operating without a certificate attracts a penalty of up to K50,000 for each day. Once registered, it must keep a registered office, file an annual return, keep accounts for its PNG activities and notify changes of committee members, name, office and agent.

Re-registration: the deadline that catches every existing association

This is the provision most likely to matter to an association reading this page. Every association incorporated under the 1966 Act, and every overseas association registered under that Act or as an overseas company, must apply for re-registration within one year after the 2023 Act commences (section 167). An association that does not apply is removed from the register (section 168). It can be restored within two years by filing the application and the outstanding returns, or by court order within five years. Re-registration creates no new legal entity: property, contracts, membership and legal proceedings all continue.

Amalgamation, deregistration and winding up

Two incorporated associations may amalgamate. An association may be removed from the register by the Registrar, or deregistered voluntarily on its own application, and may later be restored. On a winding up, surplus assets are distributed according to the Act and the rules — and for a public benefit association they must go to another public benefit body.